Posted Sat Mar 29 20:14:13 EAT 2014

Falling export revenue triggers search for alternative tea markets

In Summary

Glut in production and dependence on traditional buyers the main reasons for reduced earnings

Ministry plans to set up value-addition plant in conjunction with EAC member states

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The search for new export markets for Kenya’s tea has began in earnest as prices fall this year.

Policy makers at the Agriculture ministry say they are scouting for new outlets for tea as volatile markets continue to hurt earnings.

This is partly due to a glut in production as well as over-reliance on traditional buyers in Egypt, Pakistan, Afghanistan, Sudan and the United Kingdom. The five countries take up 75 per cent of Kenya’s tea exports.

“We are exploring new markets in Eastern Europe and the Far East to stir demand, having recorded optimum performance in existing markets, including Russia and China,” Agriculture Secretary Felix Koskei said in an interview.

In addition to oversupply, which is global, it is the over-reliance on the five key markets that has dampened trade.

He said he was also targeting a possible bilateral agreement with Nigeria, as well as looking into establishing a value-addition plant with EAC members since tea is currently sold raw.

“The plant will see our teas processed and sold together,” added Mr Koskei.

Tea exports earned Kenya Sh106 billion in 2012, nearly equal to the foreign exchange it earned the previous year. The decline in prices is partly blamed on the political unrest in Egypt, which buys 20 per cent of Kenya’s tea. There is also turmoil in tea-buying countries like Syria, Pakistan and Sudan, which has reduced their purchasing power.

According to industry regulator Tea Board of Kenya, 2013 saw the highest production in three years, following a slump in the previous two years.

“Owing to good weather conditions mostly experienced in the first half of the year, cumulative production for 2013 peaked at 432.4 million kilos against 369.5 million kilos in 2012,” TBK said in a monthly report, noting that small-scale farmers account for more than 60 per cent of the country’s total production.

“This is one of the worst years. There has been no mini-bonus this year for small-scale holders, and chances are that the main bonus (second payment) will drop significantly,” said Global Tea and Commodities chief executive Peter Kimanga.